Dell profit falls 63 percent as PC sales stay soft

May 28, 2009 By JESSICA MINTZ , AP Technology Writer
In this photo taken April 21, 2009 photo shows Dell CEO Michael Dell speaking in Palo Alto, Calif. PC maker Dell Inc. said Thursday, May 28, 2009, its fiscal first-quarter profit fell 63 percent as the recession crimped computer sales around the world.(AP Photo/Paul Sakuma)

(AP) -- Dell Inc. said Thursday its fiscal first-quarter profit fell 63 percent as the recession continued to crimp computer sales around the world.

The results, coupled with a cautious outlook from the world's top PC seller, Hewlett-Packard Co., indicate that the computer market has not improved much since last year's economic meltdown led to a holiday season that was the industry's worst stretch in six years.

Dell's earnings for the three months that ended May 1 sank to $290 million, or 15 cents per share, from $784 million, or 38 cents per share, in the same period last year.

The most recent results included a 9-cent charge from closing facilities and paying severance to laid-off workers. Excluding the charge, Dell earned 24 cents per share, or a penny better than analysts had predicted, according to a Thomson Reuters survey.

Sales dropped 23 percent to $12.3 billion, lower than the $12.6 billion analysts had predicted for Round Rock, Texas-based Dell.

In a conference call, Chief Financial Officer Brian Gladden said sales picked up toward the end of the quarter, but that is normal for the time of year. Looking ahead, Gladden said orders and conversations with customers yield "mixed signals."

"We would hope that we would see improved demand in the later part of the year," Gladden said. "Hopefully sooner versus later."

Hewlett-Packard's CEO, Mark Hurd, has expressed similar caution. Speaking at an investor conference Thursday, Hurd would not say when he thought the PC market would begin to rebound.

That is in contrast to Paul Otellini, the CEO of Intel Corp., the world's biggest supplier of PC microprocessors, who has said sales already appear to have bottomed out and returned to normal seasonal patterns.

At Dell, sales of laptops and the smaller, less powerful netbooks, which together make up Dell's largest product category, fell 20 percent in the quarter. Recession-weary shoppers' preference for netbooks and low-end PCs dragged average prices down 8 percent.

Revenue from large enterprises and small and medium-sized businesses worldwide fell about 30 percent. Consumer sales dropped 16 percent.

Dell said it slashed operating expenses by 15 percent from a year ago to $1.8 billion as the PC maker tries to squeeze $4 billion out of its annual costs.

Shares of Dell edged up 12 cents to $11.60 in after-hours trading.

©2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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